April Retail Sales Come In Like a Lion, but May Could Be a Lamb

The April retail sales numbers released by the U.S. Commerce Department were better than expected, but retailers are warning that May could be slower. With Memorial Day falling on May 31 this year, compared to May 25 in 2009, those Memorial Day sales numbers will land in the June till rather than May's, just like the earlier Easter this year shifted sales from April to March.

Retailers reporting first-quarter results this week said they expect the shift to cost them around three percentage points off their May comparable sales growth rates -- in stores open at least a year -- but it won't necessarily boost June as much. June is a five-week month this year, so it's already expected to show stronger sales than last year, thanks to that extra week. That will mask the true strength of Memorial Day sales.

"Consumer is No Longer Hiding"

Retail sales continue to go up and down month by month, but the big picture shows recession-socked consumers are coming out to the stores -- very carefully. Most of the first quarter reports noted store traffic is rising, even if average store receipts stayed put. "Appointment shopping" -- that is, sales events like Easter, Memorial Day and Back-to-School -- will draw them out.

"We think the consumer is no longer hiding, but they're being very pragmatic in how they shop," J.C. Penney Co. (JCP) chairman Mike Ullman told an analysts' conference call Friday morning. Penney's reported comparable sales for the quarter ended April 30 turned positive, up 1.3%.

The Commerce Department's retail and food services sales tally for April rose to $366.4 billion, up 8.8% from April 2009 and 0.4% from this March; analysts had expected a 0.2% increase. Excluding auto sales, totals were up 7.6% from the year-ago month and retail sales only were up 9.6%; auto sales were up 15.1% above April 2009.

The Commerce Department's tally is much better than the numbers reported by major retailers last week because they include sales from a wider group of merchants, including gas stations, which were up 30% year over year, thanks to rising gas prices. Commerce's numbers are the most complete picture of retail; they include gas, food and auto sales, as well as the results of Wal-Mart Stores (WMT), the world's largest retailer, which doesn't publicly report monthly sales.

Home-Related Retailers See Healthy Increase

Digging into the numbers, there were some areas of strength that should give hope to retailers. Home-related merchants saw increases in April, just as the arrival of spring weather in most of the country kicks off home-improvement season. Furniture and home furnishings stores saw sales rise 4.6% above April 2009, and electronics stores -- which are only now getting some relief from dropping TV prices -- were up 3.8%.

Most impressive was the 12.1% year-over-year increase in building material and garden supply stores, which also saw a healthy 6.9% increase over the previous month. Expect some more optimistic outlooks from management when hardware chains Lowes Cos. (LOW) and Home Depot (HD) report first-quarter results next week. Both companies have been cautious in their outlooks for this year -- Home Depot more so than Lowe's -- saying housing and construction remain weak. But they both have recently seen an uptick in small- to mid-size remodeling projects among homeowners, as the economy begins to pick up.

Slow Road to Recovery Turns into a Sprint

The increases in home and continuing growth in apparel -- up 5.7% year over year -- are making observers optimistic that consumers are getting more comfortable spending money on non-essentials again, even if the see-sawing monthly sales numbers show they're still skittish. The National Retail Federation calculated sales March and April sales combined rose 5.6%, showing momentum over last year.

"The slow road to recovery is turning into a sprint as retailers experienced a nice bounce in April," said NRF CEO Matt Shay, in a statement. "But maintaining this sales momentum will be challenging. Until our economy begins to create jobs and reduce unemployment, the breadth and sustainability of this recovery remains uncertain."